No. That article does NOT "explain how this [MFN] policy equates with colluding to raise prices."

It does point out how overall prices at the consumer end rose by 18% or so. Correct. But when you back up and look twice, you'll see that it's relative to Amazon's loss leader pricing, and not due to a baseline increase in wholesale pricing.

So instead, it can be fairly stated that the Agency model introduced by Apple restored fair pricing AND competition to the ebook market.

I'm curious. Why is this so completely lost on you?

I'm equally curious about something else… Do you mind if I ask, do you work with or for Amazon in any way that directly benefits you? In particular, with regards to the ebook marketplace?

You are fighting for this position as if it matters personally to you.

Well written and I agree. The question I'd like the answer to is this, why did prices fall? Was it because Amazon had some ebooks overpriced or did sales die down enough to warrant a price drop?

Definitely the latter. ebook prices were going to fall to less then $5, if not lower. And it was going to happen sooner than later.

1. People don't read books anymore. Yes, Steve Jobs was right. The competition for our time is intense. What would I rather do during the 60 minutes per day of free time I have? Watch TV and the 500 channels available? Read and participate in an Internet forum? (I do this too much obviously). Read websites and blogs? Play a game? (Kingdom Rush FTW!)

2. People don't value digital goods as much. Exact same content as a paper book, but it's simply not something that will be valued as much as paper book because of some innate sense of impermanence. Amazon knows it. Apple knows it. The DOJ and Judge Cote apparently do not. With such low valuation, translating to low demand, ebooks are destined to go down to something nearing apps ($0.99?), movies ($3.99?), and music ($1.29). Something below a certain level which people will consider disposable. It may be inevitable that ebooks will have embedded ads in them, maybe even web cam activated audio and video, let alone text ads.

3. The response time for understanding the effects of price changes is quite quick. Amazon has had this advantage for a long time. The publishers got a look at this with agency and ebooks. Like with app developers, they learned what prices would generate the most revenue, through time, for an ebook. If the publishers kept prices high, I think they would quickly see reduced sales because of number 1 and 2.

I always try to be an optimist. I want to believe that justice is blind. But I'm really starting to think that Apple has pissed someone off in the current administration.

Maybe they're just following China's lead…? Push a little and maybe they'll capitulate on that "tax thing"…?

Either way it's a bad precedent. Apple is among the best and brightest American company to ever come along. They practice ethics above and beyond most companies, and not just for good PR. It's ingrained in their culture. They are far from perfect, and occasionally need to be shown if they drift from that core, but they are responsive, and mostly self-correcting.

The fact that Tim Cook can step up and apologize for mistakes the company makes is in itself almost unprecedented. They deserve a lot more benefit of the doubt. From us as well as our government.

Most agreements I enter into don't remotely enter the realm of "demands" at all.

Why do you not get this?

Ah, I see, you're not a baker… you're also not a Scholar, and therefore…?

Oh never mind.

OK then answer me this. Were the publishers allowed to scoff at the MFN clause, or did Apple say "take it or leave it" and did they not also tell the publishers that they'd not allow any ebook selling apps if they didn't agree? I'm sure that I could walk around pointing guns at people's heads, ask for things nicely, and get what I want.

"Few things are harder to put up with than the annoyance of a good example" Mark Twain"Just because something is deemed the law doesn't make it just" - SolipsismX

Definitely the latter. ebook prices were going to fall to less then $5, if not lower. And it was going to happen sooner than later.

1. People don't read books anymore. Yes, Steve Jobs was right. The competition for our time is intense. What would I rather do during the 60 minutes per day of free time I have? Watch TV and the 500 channels available? Read and participate in an Internet forum? (I do this too much obviously). Read websites and blogs? Play a game? (Kingdom Rush FTW!)

2. People don't value digital goods as much. Exact same content as a paper book, but it's simply not something that will be valued as much as paper book because of some innate sense of impermanence. Amazon knows it. Apple knows it. The DOJ and Judge Cote apparently do not. With such low valuation, translating to low demand, ebooks are destined to go down to something nearing apps ($0.99?), movies ($3.99?), and music ($1.29). Something below a certain level which people will consider disposable. It may be inevitable that ebooks will have embedded ads in them, maybe even web cam activated audio and video, let alone text ads.

3. The response time for understanding the effects of price changes is quite quick. Amazon has had this advantage for a long time. The publishers got a look at this with agency and ebooks. Like with app developers, they learned what prices would generate the most revenue, through time, for an ebook. If the publishers kept prices high, I think they would quickly see reduced sales because of number 1 and 2.

There was an immediate 12-17% (depending on the publisher) drop in sales after the agency model was introduced. Apologies for leaving that out.

"Few things are harder to put up with than the annoyance of a good example" Mark Twain"Just because something is deemed the law doesn't make it just" - SolipsismX

Definitely the latter. ebook prices were going to fall to less then $5, if not lower. And it was going to happen sooner than later.

1. People don't read books anymore. Yes, Steve Jobs was right. The competition for our time is intense. What would I rather do during the 60 minutes per day of free time I have? Watch TV and the 500 channels available? Read and participate in an Internet forum? (I do this too much obviously). Read websites and blogs? Play a game? (Kingdom Rush FTW!)

2. People don't value digital goods as much. Exact same content as a paper book, but it's simply not something that will be valued as much as paper book because of some innate sense of impermanence. Amazon knows it. Apple knows it. The DOJ and Judge Cote apparently do not. With such low valuation, translating to low demand, ebooks are destined to go down to something nearing apps ($0.99?), movies ($3.99?), and music ($1.29). Something below a certain level which people will consider disposable. It may be inevitable that ebooks will have embedded ads in them, maybe even web cam activated audio and video, let alone text ads.

3. The response time for understanding the effects of price changes is quite quick. Amazon has had this advantage for a long time. The publishers got a look at this with agency and ebooks. Like with app developers, they learned what prices would generate the most revenue, through time, for an ebook. If the publishers kept prices high, I think they would quickly see reduced sales because of number 1 and 2.

1. You're wrong. Most people I know always have "a good book they're enjoying" on hand. I read about 4 books a month on average (3 of those are now digital, typically). The sales levels of books in general (print or digital) remains extremely strong. J.K. Rowling didn't become a billionaire because "no one reads books anymore".

2. I "value" my ebooks almost as much as my print editions. I will agree that there is something more inherently "tangible" with the tactile paper book. It is possible to "bond" with a physical book in a way I can't 'sense' with a digital version. But the truth is, most of the books I read will only be read once. I've given away most of what I've read (something I can't do with my digital versions sadly), and those books that I want to keep, I typically buy the print edition of, and add to my library. I keep that to a minimum now though, as I discovered that lugging a library around was more a burden than a blessing. For this, I'm ever grateful to my growing digital library. I'm learning to love it almost as much as the musty books on my shelves.

3. I disagree. I think the reasons for "reduced sales" are unrelated to your 1 & 2 premises. In fact, "reduced sales" in the general book world will have little or nothing to do with these matters at all. The modern 'consumer' has become desensitized to "suggested retail prices", and reacts almost instinctively to "promotional" activities and the quality of the offerings. The baseline pricing of books has little overall effect on the market's sales pace.

It's more like the movie industry. When a Summer full of great films arrives, it's a blockbuster season. When most of the films are copycat tripe riding the coattails of one major hit, it's a crap season (I'm speaking in terms of revenues here). Pricing does aid competition, and good value inspires more sales, but in the end, as always, it's the "content" that matters most.

Harry Potter outsold everything else in history for top-priced hard cover editions. Dan Brown books as well. When they're popular, they sell. Yes. $30 for a hard cover book, versus $15 for the 'deluxe' paperback, versus $10 for the ebook… And yet, most people bought the Hard Cover. By the tens of millions.

OK then answer me this. Were the publishers allowed to scoff at the MFN clause, or did Apple say "take it or leave it" and did they not also tell the publishers that they'd not allow any ebook selling apps if they didn't agree? I'm sure that I could walk around pointing guns at people's heads, ask for things nicely, and get what I want.

You clearly don't understand doing business at this level, or apparently even the concept of entering into "mutually beneficial, good faith" agreements...

Apparently, in your world, every agreement in the business realm involves a hostile, confrontational approach and attitude, yes? One side dictating all the terms, contracts mainly involving "Take it or Leave it", one-sided Demands, and (heaven?) Forbid this and Forbid that, and the Threat of the Headshot. Wow. Really. Remind me to NEVER consider doing business with YOU.

OK, and in response, answer me this:

- Why would the publishers "scoff"… if they'd just willingly entered into a very beneficial, desirable and mutually agreeable arrangement with a new retail partner ON MUTUALLY AGREED TERMS?

- Why would Apple take the position of "take it or leave it" if they'd just willingly entered into a very beneficial, desirable and mutually agreeable arrangement with their new publishing partners ON MUTUALLY AGREED TERMS?

- Why do you assume Apple enters into ANY such business negotiations with a "gun pointed at people's heads"? That's a hell of a way to enter into new business partnerships…. erm, not?

Every business negotiation I've ever been involved in was about a) clearly defining the spirit of agreement so there is no risk of misunderstanding, b) ensuring everyone got what they needed (seeking what we refer to as the "win-win" in any given arrangement) and c) entering into agreements in "good faith".

The intent in all but the most rare cases is to forge a strong, lasting and mutually beneficial strategic partnership or alliance.

Something it appears the DOJ likes to refer to as "conspiracy".

And that's it. I'm done with this. I assume you will definitely be getting the last word in, since mine stop here… have fun with that.

You clearly don't understand doing business at this level, or apparently even the concept of entering into "mutually beneficial, good faith" agreements...

Apparently, in your world, every agreement in the business realm involves a hostile, confrontational approach and attitude, yes? One side dictating all the terms, contracts mainly involving "Take it or Leave it", one-sided Demands, and (heaven?) Forbid this and Forbid that, and the Threat of the Headshot. Wow. Really. Remind me to NEVER consider doing business with YOU.

OK, and in response, answer me this:

- Why would the publishers "scoff"… if they'd just willingly entered into a very beneficial, desirable and mutually agreeable arrangement with a new retail partner ON MUTUALLY AGREED TERMS?

- Why would Apple take the position of "take it or leave it" if they'd just willingly entered into a very beneficial, desirable and mutually agreeable arrangement with their new publishing partners ON MUTUALLY AGREED TERMS?

- Why do you assume Apple enters into ANY such business negotiations with a "gun pointed at people's heads"? That's a hell of a way to enter into new business partnerships…. erm, not?

Every business negotiation I've ever been involved in was about a) clearly defining the spirit of agreement so there is no risk of misunderstanding, b) ensuring everyone got what they needed (seeking what we refer to as the "win-win" in any given arrangement) and c) entering into agreements in "good faith".

The intent in all but the most rare cases is to forge a strong, lasting and mutually beneficial strategic partnership or alliance.

Something it appears the DOJ likes to refer to as "conspiracy".

And that's it. I'm done with this. I assume you will definitely be getting the last word in, since mine stop here… have fun with that.

Try answering the question, and I guess you deny Apple employing tactics to get a 'mutual' agreement. Didn't Amazon and the publishers enter into a 'mutual' agreement? So what changed that they all of a sudden needed a new mutual agreement?

"Few things are harder to put up with than the annoyance of a good example" Mark Twain"Just because something is deemed the law doesn't make it just" - SolipsismX

OK then answer me this. Were the publishers allowed to scoff at the MFN clause, or did Apple say "take it or leave it" and did they not also tell the publishers that they'd not allow any ebook selling apps if they didn't agree? I'm sure that I could walk around pointing guns at people's heads, ask for things nicely, and get what I want.

How did Apple get that much power with 0% market share?

Here are my problems with the DoJ:
1. How old is the ebook market? Has the govt acted so quickly with other markets that young?
2. Who determines what the fair market price is?
3. Amazon was undercutting everyone with an artificially low price. Monopoly abuse, anyone?
4. Short term, prices went up. Longer term, prices were falling as the system reaches a new equilibrium.
5. After Apple, more competition sprang up.

Here are my problems with the DoJ:
1. How old is the ebook market? Has the govt acted so quickly with other markets that young?
2. Who determines what the fair market price is?
3. Amazon was undercutting everyone with an artificially low price. Monopoly abuse, anyone?
4. Short term, prices went up. Longer term, prices were falling as the system reaches a new equilibrium.
5. After Apple, more competition sprang up.

Millions upon millions of ready iTunes, and app store accounts with credit cards, plus the proven ability to sell devices like crazy. Btw you're absolutely right about the DoJ. Another question I would have is why wasn't Amazon bought up on the same charges when they entered the music market? Didn't the music industry and Amazon get together to raise the price of songs?

"Few things are harder to put up with than the annoyance of a good example" Mark Twain"Just because something is deemed the law doesn't make it just" - SolipsismX

It is important to understand that large Amazon investors are large contributors to the current Administration, and to note that Amazon's CEO just rescued a dying liberal newspaper in DC.

If you think this is about anti-trust or consumer interest, you are missing the whole event.

The elephant in the room is Amazon's hugely anti-competitive predatory pricing. It's stated intent in SEC filings is to drive others out of business and then raise prices unopposed. The DOJ is not missing this -- it is paid off. We have corruption at the highest levels here.

1. You're wrong. Most people I know always have "a good book they're enjoying" on hand. I read about 4 books a month on average (3 of those are now digital, typically). The sales levels of books in general (print or digital) remains extremely strong. J.K. Rowling didn't become a billionaire because "no one reads books anymore".

I think you're overly optimistic. I know people who NEVER read.

As for JK Rowling, I've seen estimates that she has sold 350 M books. The majority of people have bought the entire set, so that means 50 M people own JK Rowling's books. That's well under 1% of the world population. And that's the most popular author of our time.

Look at the big picture. It looks like total US book sales are around $20 B a year. If the average book price is $20 (hardcovers and text books bring the average up), that's 1 B books per year - or roughly 3 per American. Globally, the numbers are undoubtedly much lower.

"I'm way over my head when it comes to technical issues like this"Gatorguy 5/31/13

As for JK Rowling, I've seen estimates that she has sold 350 M books. The majority of people have bought the entire set, so that means 50 M people own JK Rowling's books. That's well under 1% of the world population. And that's the most popular author of our time.

Look at the big picture. It looks like total US book sales are around $20 B a year. If the average book price is $20 (hardcovers and text books bring the average up), that's 1 B books per year - or roughly 3 per American. Globally, the numbers are undoubtedly much lower.

Perhaps I am. But I also know a few people who NEVER read books (note I said "most" of the people I know have a good book handy). The majority of Rowling's books sold here in the US, as I understand it. They broke the averages seen in general. I read that her books broke the 500M mark, but that's probably as speculative as estimating Samsung's actual handset sales.

I have traveled extensively and lived abroad half my adult life. I can say with some certainty that people probably read far more books per capita in other countries than here (although most of those countries have far lower populations overall). In Japan for instance, reading is still a major "hobby". In France, the UK, Ukraine… It's crazy-common to see people walking with a book under their arm. More likely than it being an iPad even. :)

It's no doubt changing. Your points about the numbers are no doubt valid. I wonder though, if that really represents a reduction in sales or not. A BILLION books a year! How long do you suppose that level (or higher) has been 'the norm'?

If $20B a year is the approx. level of the book market in the U.S., does that represent an expanding or shrinking market? Your opener implied that it's historically low or shrinking...

Note the top line summary (I haven't purchased the full report), which implies significant growth in trade publishing and ebooks over the past few years...

And lastly, this, which may refute all our assumptions on the matter… :)

"Reading on the Rise, the National Endowment for the Arts’ new report, documents a significant turning point in recent American cultural history. For the first time in over a quarter-century, our survey shows that literary reading has risen among adult Americans. After decades of declining trends, there has been a decisive and unambiguous increase among virtually every group measured in this comprehensive national survey."

Perhaps I am. But I also know a few people who NEVER read books (note I said "most" of the people I know have a good book handy). The majority of Rowling's books sold here in the US, as I understand it. They broke the averages seen in general. I read that her books broke the 500M mark, but that's probably as speculative as estimating Samsung's actual handset sales.

I have traveled extensively and lived abroad half my adult life. I can say with some certainty that people probably read far more books per capita in other countries than here. In Japan for instance, reading is still a major "hobby". In France, the UK, Ukraine… It's crazy-common to see people walking with a book under their arm. More likely than it being an iPad even.

It's no doubt changing. Your points about the numbers are no doubt valid. I wonder though, if that really represents a reduction in sales or not. A BILLION books a year! How long do you suppose that level (or higher) has been 'the norm'?

If $20B a year is the approx. level of the book market in the U.S., does that represent an expanding or shrinking market? Your opener implied that it's historically low or shrinking...

People just might start reading more because of the iPad. I have a young son and the push to get the kids reading is greater than when I was his age. I wouldn't be surprised if the younger generation turns out to be bigger readers than we currently are.

"Few things are harder to put up with than the annoyance of a good example" Mark Twain"Just because something is deemed the law doesn't make it just" - SolipsismX

People just might start reading more because of the iPad. I have a young son and the push to get the kids reading is greater than when I was his age. I wouldn't be surprised if the younger generation turns out to be bigger readers than we currently are.

So Apple expands the market for everyone but that is apparently anti competitive.

Exactly, so unless they're able to differentiate themselves from the iBookstore and Amazon most will probably not last long. Don't get me wrong, I'm glad that they exist and will at least check them out.

"Few things are harder to put up with than the annoyance of a good example" Mark Twain"Just because something is deemed the law doesn't make it just" - SolipsismX

I don't buy ebooks. But if I did, I would have a choice and not rely on only Amazon.

But I'd guess that even though you had a choice you wouldn't even bother buying from anyone else than from Apple. It's kinda like all those useless features on a Samsung phone, people don't use them but like knowing that they're there.

"Few things are harder to put up with than the annoyance of a good example" Mark Twain"Just because something is deemed the law doesn't make it just" - SolipsismX

The funny thing is that they blame Apple because they are preventing Amazon to sell books at, or bellow cost, arguing it raised the prices for the customers.
Selling at or below cost is prohibited in many countries because it is anticompetitive for a large company to kill emerging competition by selling at or below cost.

An cross subsidies are, they give away the SW to promote the Kindle, and to kill competition, they got Borders, one more to go...

1. You're wrong. Most people I know always have "a good book they're enjoying" on hand. I read about 4 books a month on average (3 of those are now digital, typically). The sales levels of books in general (print or digital) remains extremely strong. J.K. Rowling didn't become a billionaire because "no one reads books anymore".

2. I "value" my ebooks almost as much as my print editions. I will agree that there is something more inherently "tangible" with the tactile paper book. It is possible to "bond" with a physical book in a way I can't 'sense' with a digital version. But the truth is, most of the books I read will only be read once. I've given away most of what I've read (something I can't do with my digital versions sadly), and those books that I want to keep, I typically buy the print edition of, and add to my library. I keep that to a minimum now though, as I discovered that lugging a library around was more a burden than a blessing. For this, I'm ever grateful to my growing digital library. I'm learning to love it almost as much as the musty books on my shelves.

3. I disagree. I think the reasons for "reduced sales" are unrelated to your 1 & 2 premises. In fact, "reduced sales" in the general book world will have little or nothing to do with these matters at all. The modern 'consumer' has become desensitized to "suggested retail prices", and reacts almost instinctively to "promotional" activities and the quality of the offerings. The baseline pricing of books has little overall effect on the market's sales pace.

It's more like the movie industry. When a Summer full of great films arrives, it's a blockbuster season. When most of the films are copycat tripe riding the coattails of one major hit, it's a crap season (I'm speaking in terms of revenues here). Pricing does aid competition, and good value inspires more sales, but in the end, as always, it's the "content" that matters most.

Harry Potter outsold everything else in history for top-priced hard cover editions. Dan Brown books as well. When they're popular, they sell. Yes. $30 for a hard cover book, versus $15 for the 'deluxe' paperback, versus $10 for the ebook… And yet, most people bought the Hard Cover. By the tens of millions.

Because, you know, nobody reads books anymore.

Harry Potter was almost 20 years ago.

Where is the "Harry Potter" of the last 5 years?

Today's most successful books seem to be soft core porn for housewives.

Edited by hill60 - 8/10/13 at 2:50pm

Better than my Bose, better than my Skullcandy's, listening to Mozart through my LeBron James limited edition PowerBeats by Dre is almost as good as my Sennheisers.

It's different because I included the MFN clause not the agency model. Apple doesn't forbid them the agreement does.

It's not so much "forbidding" as allowing Apple to sell at lower prices. Apple allowed the publishers to set retail prices. Apple put caps on what they could charge. The publisher might well say some titles should retail for 14.99 (taking into account Apple's 30%), in which case the publisher receives 10.50 and Apple gets 4.49.

So, let's say Amazon bought the same title from the publisher at wholesale for 10.50, but Amazon sold it at a loss for 9.99. Apple is asking that if the same title is sold elsewhere for less than the 14.99, that Apple can lower it to that price as well, in order to be competitive. Apple says they want to be able to sell it for 9.99 as well -- in which case the publisher would get 6 and Apple would get 3.

But, I can see how this would encourage the Publishers to seek Agency models with Amazon, rather than the wholesale model.

They're out there but need to be found. The Game of Thrones books are just as old and it's only recently that George RR Martin is enjoying the fruits of his labor.

The GoT is actually older than HP and the Philosopher's Stone by one year. ;) I'm am indeed old now. It's nice that the book series is getting a secondary boost because of the TV series, and GRRM is getting much deserved mainstream attention, but he went all Robert Jordan on us with the last two books. He really only had enough for 3 books. After that, it's been a slog through the mud.

Anyways, yeah, I wouldn't say that there aren't any great novels or books anymore, nor no more international best sellers. They are out there, and will continue to be out there, but I think some of you have to think more carefully about with a "digital good" is and how it plays out in the market. It's great that there some people who really value books, the stories in of themselves, and are willing to pay $10 to $20 for an ebook at release time. But I simply do not see the market economics supporting the prices seen in paper based books, especially hard covers. Not even at mass paper back prices of $6 to $8? Btw, is a mass paperback even $8 anymore? Has the SRP reached $9 yet?

A digital good essentially has infinite supply. I'll say it again, a digital good has infinite supply. The consumer of digital goods has market powers heretofore unknown in the physical goods, as they can get a pirated copy of it with not much effort. Then, the aforementioned intense competition for our free time. Crowded market, low demand, and infinite supply all spell low prices, and not $10. It'll really be a minimum risk, disposable amount of money. The money for a digital good acts more as a service than as way to own it.

The price will be less than $5, probably closer to $2 then $5. It doesn't matter if the price control was in the hands of publishers or retailers either. In a digital world, they are effectively the same thing anyways (with an agency model, Amazon selling Kindle books on iOS is a defacto publisher, not a retailer). Only the renown, branded authors will be able to command a price premium, maybe.

On the bright side, if the cost is so low, it will mean more books will be in the eyes of readers, but there will be less overall money for the industry. Who knows maybe increased volume really will make it up as the digital world encompasses the entire world instead of a physical distribution network. The industry (authors, publishers, resellers) have to do things differently in a digital world.

No. That article does NOT "explain how this [MFN] policy equates with colluding to raise prices."

It does point out how overall prices at the consumer end rose by 18% or so. Correct. But when you back up and look twice, you'll see that it's relative to Amazon's loss leader pricing, and not due to a baseline increase in wholesale pricing.

So instead, it can be fairly stated that the Agency model introduced by Apple restored fair pricing AND competition to the ebook market.

I'm curious. Why is this so completely lost on you?

I'm equally curious about something else… Do you mind if I ask, do you work with or for Amazon in any way that directly benefits you? In particular, with regards to the ebook marketplace?

No I do not work for Amazon. The only side I'm on is yours and mine as consumers.

"Few things are harder to put up with than the annoyance of a good example" Mark Twain"Just because something is deemed the law doesn't make it just" - SolipsismX

Today's most successful books seem to be soft core porn for housewives.

That's not true, the first HP book was 16 years ago and the most recent was 6.

Harry Potter is the most successful book series of all time. Saying that books are dead because there isn't a current "Harry Potter" is like saying pop music is dead because there's no current Beatlemania, absurd.

Maybe the latest success story is soft porn for housewives. That's still a book. Your distaste for it doesn't negate the fact that it's a book and people are reading it.